Highlights
The CPI was a little tamer than expected for November as food and energy were not as strong as feared and prices were pervasively soft elsewhere. The overall CPI in November rose a modest 0.1 percent, following a 0.2 percent increase in October. Economists had expected a 0.2 percent rise for November. Excluding food and energy, CPI inflation firmed to up 0.1 percent from no change the month before. The median market forecast called for a 0.1 percent core rise for the latest month.

By major components, energy increased only 0.2 percent, following a 2.6 percent surge in October. Most of the November rise was from fuel oil which jumped 4.2 percent. Gasoline was up 0.7 percent while electricity rose 0.9 percent. Damping these was a 5.7 percent drop in natural gas. Food price inflation increased 0.2 percent after a 0.1 percent rise the prior month.

For the 0.1 percent gain in the core, increases in the indexes for shelter and airline fares accounted for most of the rise, while the indexes for new vehicles, used cars and trucks, and household furnishings and operations all declined. Softness was widespread within major expenditure components.

Year-on-year, overall CPI inflation rose to 1.1 (seasonally adjusted), down from 1.2 percent in November. The core rate in firmed to 0.7 percent from 0.6 percent in October. On an unadjusted year-ago basis, the headline number was up 1.1 percent in November while the core was up 0.8 percent.

The bottom line is that inflation at the consumer level is still quite subdued despite inflation pressure beginning to rise at the producer level and already high for commodities. The November CPI allows or rather calls for the Fed to continue with balance sheet expansion.

On the news, Treasury rates eased with a higher than expected Empire State manufacturing number partially offsetting. Equity futures are down moderately, largely over worries about European sovereign debt.

Recent History Of This Indicator
The consumer price index in October posted a 0.2 percent boost, following a 0.1 percent rise in September. Excluding food and energy, CPI inflation was unchanged for the third month in a row. By major components, energy increased a strong 2.6 percent, following a 0.7 percent boost in September. Most of the gain, 90 percent according to the Bureau of Labor Statistics, was from a 4.6 percent surge in gasoline prices. Food slowed to a 0.1 percent rise after gaining 0.3 percent the month before. Weakness in the core was led by declines in indexes for new vehicles, used cars and trucks, apparel, recreation, and tobacco. Also, shelter rose only 0.1 percent.

Definition
The Consumer Price Index is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. That is the index shows the change in price levels since the index base period, currently 1982-84 = 100. Monthly changes in the CPI represent the rate of inflation.
Why Investors Care

It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the CPI are mainly volatile because of sharp fluctuations in food and energy prices. The core CPI eliminates the sharper fluctuations.Data Source: Haver Analytics

Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core CPI does not fluctuate as much as the total CPI.Data Source: Haver Analytics